Does Wal-Mart Stores Inc. have a buffer against the mighty Amazon in its focus on groceries?

It depends who you ask.

The retail giant, one of few companies in the sector to announce positive earnings for the first quarter, posted revenue of $115.9 billion early Thursday, exceeding the FactSet consensus of $113.2 billion. Walmart U.S.
WMT, -0.37%
reported sales of $73.3 billion, with same-store sales up 1%. The company’s Neighborhood Market stores saw same-store sales increase 7.1%.

“Grocery is a deep and wide competitive moat when it comes to Amazon,” said O’Shea.

Food is almost 100% brick-and-mortar focused, he said, as most grocery sales take place outside of urban markets, where online grocery sales get a lot of play. For many consumers, it is difficult to have all fresh food delivered.

“Amazon sells a lot of grocery equivalents,” said O’Shea. “But we still believe grocery is a local business. People are wedded to their local stores.”

Moreover, customers can be very picky about their fresh food.

“Are you going to rely on someone else to pick your fruit for you?” said O’Shea. “Who’s picking my meat? Who’s picking my vegetables? Consumers can be very fickle when it comes to fresh.”

Not a company to let a category go untouched, Amazon.com Inc.’s
AMZN, +0.17%
Prime Now service has partnered with Sprouts Farmers Markets Inc.
SFM, -0.43%
to allow members access products in Sprouts stores for home delivery. The service is available in five stores in three markets, San Diego, Los Angeles and San Jose.

Though the program is in its early days, Sprouts executives told the BMO Capital Markets Farm to Market Conference on Thursday that they’re already seeing good results and are considering expanding the program.

Amazon Prime also offers a grocery delivery service with items like pasta, cereal, coffee and cookies available for purchase. “It’s not dangerous to Wal-Mart,” said O’Shea.

However there are some who believe Wal-Mart’s same-store sales decline in grocery is significant.

“Grocery has been one of their poorer-performing categories for the last few years,” said Brian Yarbrough, consumer research analyst at Edward Jones.

Yarbrough believes companies like Kroger Co., which reported 3.7% same-store sales growth in the fourth quarter, excluding fuel, is bigger competition in the grocery space. (That same-store sales result also includes six weeks of Roundy’s results. Kroger’s agreed to purchase Roundy’s in November 2015.)

“Grocery is a regular trip item,” Yarbrough said. “But with that being said, for someone like Wal-Mart, it has a lower profit margin and they have been losing share because they don’t have the price leadership.”

According to Yarbrough, Wal-Mart is vulnerable because there are a lot of overlapping categories. The biggest difference between the two is demographic, with Wal-Mart customers skewing toward the lower-income side of the spectrum.

“Most Wal-Mart customers are not going to pay for Prime service,” said Yarbrough.

Wal-Mart shares are up 12.9% for the year so far, but down 8.8% for the past year. The S&P 500 is down 0.2% for the year to date.

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